Panchamy Pack (Kerala) Ltd. vs Travancore Devaswom Board

K.S. Radhakrishnan, J.—Petitioner, a private limited company, has approached this Court seeking a writ of certiorari to quash Ext. PI order dated 23-8-2007 issued by the Travancore Devaswom Board black-listing the petitioner company and excluding them from all dealings with the Board. Petitioner submits that the order was passed in violation of the principles of natural justice and also the fundamental rights guaranteed to the petitioner under Articles 14 and 19(1)(g) of the Constitution of India.

Travancore Devaswom Board had executed an agreement on 13-4-1999 with the petitioner-company for manufacturing, packing and supplying of Aravana Prasadam through the sale counters of the Travancore Devaswom Board. At the initial stage, name of the company was M/s. Pamchami Exporters Private Limited and later directors of the above mentioned company incorporated another company by name "Panchami Pack (Kerala) Private Limited" for production of Aravana as per BOT scheme. As per Clause 9 of the agreement period of contract was for eight years and the number of cans to be supplied was 50 lakhs. Period of the agreement ended on 12-4-2007. Though the period was extended for a brief period with the approval of this Court, during the currency of the agreement various disputes arose between the parties. The Board issued letter dated 20-11 -2006 informing the petitioner of the recovery of various amounts based on the agreement between the parties to which the petitioner had filed its objection on 29-11-2006. Objections were directed to be considered by the Board, vide this Court judgment in W.P.C. No. 34346 of 2005. Later the Board had issued another order dated 4-1-2007 upholding the communication dated 20-11-2006 which was challenged before this Court by the petitioner by filing W.P.C. No. 33325 of 2006. That writ petition was disposed of by this Court along with W.P.C. No. 1538 of 2007 on 19-1-2007 after noticing that the order dated 4-1 -2007 was passed without application of mind and without adverting to various objections raised by the petitioner. Later Board after hearing the petitioner passed Ext. P2 order dated 23 8-2007 stating that it has sustained a loss of Rs. 76,95,025/- due to the violation of the terms of the agreement. Board also ordered that the loss sustained to the goodwill of the Sabarimala Sannidhanam should be worked out separately by the Commissioner and the Board would be initiating recovery proceedings against the company. Aggrieved by the said order petitioner has preferred writ petition before this Court and the same is pending consideration. Board has now issued Ext. PI order dated 23-8-2007 making reference to Ext. P2 order dated 23-8-2007 and then blacklisted the petitioner-company from all dealings with the Travancore Devaswom Board, legality of which is under challenge before us in this writ petition.

We heard Sri C. K. Karunakaran, learned Counsel for the petitioner as well as Sri U. K. Rarnakrishnan, learned Counsel for the Devaswom Board.

Learned Counsel for the petitioner submitted that Ext.Pl order was passed in violation of the principles of natural justice and the same is also tainted with mala fides. It is submitted that before passing Ext. P1 order no notice was issued to the petitioner to show cause why the petitioner be not blacklisted. In support of the contention of violation of the principles of natural justice petitioner placed reliance on the decision of the Apex Court in Erusian Equipment and Chemicals Ltd. Vs. State of West Bengal and Another, ; Joseph Vilangandan Vs. The Executive Engineer, (Pwd), Ernakulam and Others, ; Raghunath Thakur Vs. State of Bihar and Others, ; M/s. Southern Painters Vs. Fertilizers and Chemicals Travancore Ltd. and another, and Rashtriya Ispat Nigam Limited and Another Vs. Verma Transport Company, . Counsel also submitted that Ext. PI is a premeditated document issued with the mala fide intention so as to disqualify the petitioner in participating in response to Ext. P6 tender notification. Counsel submitted that large amounts are due to the petitioner from the Board and no sufficient materials are there to blacklist the petitioner.

Learned Counsel for the Board on the other hand contended that notice was already issued to the petitioner while Ext. P2 order was passed before fixing the loss at Rs. 76,95,205/- and on the basis of that Ext PI order was passed and therefore no further notice is necessary for blacklisting the petitioner. Counsel also submitted that even if notice was given to the petitioner before passing Ext.Pl order the result would have been the same and therefore issuance of notice is an empty formality. Learned Counsel also submitted that the petitioner could not establish that any prejudice has been caused to it due to absence of prior notice or hearing.

Counsel submitted that principles of natural justice cannot be put into on a straight jacket formula and its application depends on the facts and circumstances of each case and the plea of violation of principles of natural justice can be sustained only if the parties show that prejudice has been caused due to non-observance of the principles of natural justice. In support of the contention counsel placed reliance on the decisions of the Apex Court in Divisional Manager, Plantation Division, Andaman and Nicobar Islands Vs. Munnu Barrick and Others, and The Secretary, A.P. Social Welfare-Residential Educational Institutions Vs. Sri Pindiga Sridhar and Others, .

Law on this point has been elaborately discussed by a Division Bench of this Court in Yakoob Vs. Kerala State Civil Supplies Corporation, , to which one of us, Justice A. K. Basheer was a party. After surveying the previous decisions on the point the Court held as follows:

The judicial precedents referred to above leave no room for any ambiguity for the position that blacklisting a contractor entails a civil consequence. It is punitive, undoubtedly. The repercussions of an order of blacklisting will be disastrous and far-reaching. The stigma of blacklisting will not only ruin the career of the contractor concerned; but will certainly mar his reputation also.

It is well settled that the rules of natural justice have to be complied with the administrative authorities also while passing orders affecting the rights of individuals, The protection given to an individual under Articles 14 and 16 of the Constitution has to be safeguarded. This Court cannot countenance any violation of the rights of the citizens.

Earliest of the decisions on the questions or blacklisting is the one rendered by the Apex Court in Erusian Equipment and Chemicals Ltd. Vs. State of West Bengal and Another, , wherein the Apex Court was dealing with the executive power of the Government under Article 298, Part III of the Constitution. The Apex Court in that case held as follows:

The Government is a Government of laws and not of men. It is true that neither the petitioner nor the respondent has any right to enter into a contract but they are entitled to equal treatment with others who offer tender or quotations for the purchase of the goods. This privilege arises because it is the Government which is trading with the public and the democratic form of Government demands equality and absence of arbitrariness and discrimination in such transactions. Hohfeld treats privileges as a form of liberty as opposed to a duty. The activities of the Government have a public element and, therefore, there should be fairness and equality. The State need not enter into any contract with any one but if it does so, it must do so fairly without discrimination and without unfair procedure. Reputation is a part of a person''s character and personality. Blacklisting tarnishes one''s reputation.

Apex Court therefore concluded that blacklisting has the effect of preventing a person from the privilege and advantage of entering into lawful relationship with the Government for purposes of gains. The fact that a disability is created by the order of blacklisting indicates that the relevant authority is to have an objective satisfaction and the fundamentals of fair play require that the person concerned should be given an opportunity to represent his case before he is put on the black list. Above decision was followed by the Apex Court in Joseph Vilangadan''s case, and later in Raghunath Thakur Vs. State of Bihar and Others, . Overruling the decision of the Full Bench of this Court in V. Punnen Thomas Vs. State of Kerala, the Apex Court in M/s. Southern Painters Vs. Fertilizers and Chemicals Travancore Ltd. and another, held that the deletion of appellant''s name from the list of approved contractors on the ground that there were some vigilance report against it could only be done consistent with and after the compliance of the principles of natural justice and this Court held that withholding of the tender form the appellant was not justified.

Ext. PI order has to be treated in the light of the above mentioned decisions and we have no hesitation to hold that the order of blacklisting the petitioner causes serious civil consequence to the petitioner and casts a stigma on the petitioner and violates the fundamental rights guaranteed to the petitioner under Articles 14 and 19(1)(g) of the Constitution of India. Basis on which Ext. PI order was issued is Ext. P2 by which the Board has determined the loss alleged to have caused by the petitioner. The mere fact that notice was issued to the petitioner while determining the loss is not sufficient for blacklisting the petitioner. Petitioner has already challenged the determination of loss by the Board. Determination of loss and blacklisting the petitioner are two separate and independent proceedings and the notice issued before determining the loss is not the notice contemplated before blacklisting the person. In such circumstances we have no hesitation to hold that Ext. PI order cap-not stand in the eye of law and the same has been issued in violation of the principles of natural justice. Ext PI order therefore would stand quashed. However, it is open to the Board to issue notice to the petitioner and hear the petitioner and pass appropriate orders in accordance with law. Writ petition is allowed as above.